Treasury mulls, but comes out against SEC, CFTC merger

The Treasury Department discussed a potential merger of the Securities and Exchange Commission and the Commodity Futures Trading Commission ahead of a Friday report floating several rollbacks of capital markets regulations.While the SEC regulates equities markets and the CFTC covers commodities and derivatives trades, the two agencies have often struggled to work together through jurisdictional overlap and duplicative efforts.Even so, Treasury Secretary Steven Mnuchin ruled that the costs and trouble to merge the two agencies would outweigh the potential budgetary and regulatory benefits of consolidating U.S. capital markets oversight."While some synergies in mission functions could be found, merging the SEC and the CFTC is unlikely to materially enhance the efficiency in which their core activities are carried out," Mnuchin and top aide Craig Phillips wrote in the Friday report."Treasury believes that merging the SEC and the CFTC would not appreciably improve on the current system. Instead, policymakers, regulators, and other stakeholders should focus on effecting changes that truly promote efficiency."The report is the second of four planned reviews of U.S. financial regulations mandated by an executive order signed by President Trump in April, the administration's de facto policy on revamping and rolling back the Dodd-Frank financial reform law.The latest report recommends scrapping a few notorious Dodd-Frank provisions while making specific adjustments to securities laws meant to ease companies' efforts to go public and raise capital.The Treasury Department suggested repealing Dodd-Frank rules forcing companies to disclose to the SEC pay disparities between executives and employees and potential investments in conflict minerals and mines with troubled safety records. The department insisted that progress in those policy areas is best left to other federal agencies, not securities regulators."Treasury recognizes that the original support for such provisions was well-intentioned," the agency wrote. "However, federal securities laws are ill-equipped to achieve such policy goals, and the effort to use securities disclosure to advance policy goals distracts from their purpose of providing effective disclosure to investors."

Doing so would require Congress to repeal those lines of Dodd-Frank or bar the SEC from spending taxpayer money to enforce the rules. Republican lawmakers have previously banned the SEC from using any funding to craft a rule forcing companies to disclose political donations, for example.

Other suggestions include adjustments the SEC or lawmakers could make to several thresholds that would allow companies to raise higher sums of money for longer periods of time without drawing more federal scrutiny.

The Treasury Department also asked the SEC to eliminate reporting requirements duplicated by internal industry regulators and suggested tighter collaboration between the agency and local regulators to ease reporting requirements.